[delinka]

A quick Google search gives me this from the first result[1]:

"Then, any remaining profits from the company can be distributed to the owners as dividends, which are taxed at a lower rate than income."

Though it doesn't specify what that rate is. Most of the other results indicate that the additional distributions beyond salary simply avoid self-employment tax. So it would appear that distributions beyond salary incur less tax, but are taxed higher than the current capital gains tax rate. It's also important to note that distributions are taxed - if you leave the money in the company, it's not taxed until it's actually distributed to the owners.

1 - http://www.inc.com/guides/201103/s-corp-vs-llc.html

[cullenking]

Again incorrect, all company profits are taxed regardless of whether you withdraw it in the form of distributions. If you withdraw distributions in excess of your basis (your share of accumulated profits/losses in the company, it can be negative or 0) then yes the distributions you take above your basis are then taxed as capital gains. Don't do that. I strongly advise finding a reliable, recommended professional to talk to about this stuff. We found a fantastic guy through our business lawyer, wish we would have found him earlier.

[delinka]

It boils down to this: don't trust search engine results and search out a competent professional. The problem I see is knowing who the competent professionals are.